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JPMorgan has downgraded Hindustan Petroleum Corporation Limited (HPCL) to underweight from a neutral stance and has revised the target price to Rs 450 from Rs 430. The revision implies a 13 percent downside, the brokerage house said.
It does not expect a repeat of inventory gains and hence expects earnings per share (EPS) to decline by 7 percent CAGR over FY17-19. “In our view, the re-rating of oil marketing companies (OMCs) now faces headwinds as policy tailwinds dissipate (fuel price deregulation and a lack of subsidy-sharing are behind us),” the brokerage house said in a report.
On consolidation buzz in the space, it does not see the activity happening going forward. In fact, the markets may not welcome the same, it feels.
Key upside risks for the stock include sharp uptick in refining and marketing margins and demand.
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